Valuation pressure

Outlook for the IT sector has changed considerably

The underperformance of information technology (IT) stocks in the recent past has been an unpleasant surprise. The Nifty IT index has lost over 10 per cent in the past month, with huge sell-offs by disappointed investors as the Q4 (and full-year) results arrived. This is despite reasonable results, and advisories indicating fair performance over the next six months. The root causes of the pessimism are more about the correction of unusually high valuations, and a downgrade in long-term prospects for the sector. The IT industry delivered supra-normal performances over the entire Covid period. Companies adopted new work-from-home protocols, in addition